-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qf20lljBA9zWIAEkWoLc39Rj+Qs+Lu6kueXzN2155PvdgAJe915JdP9chqpK1Uu5 U4H34OwsyI2kKwUnQzco8A== 0001145549-03-000269.txt : 20030312 0001145549-03-000269.hdr.sgml : 20030312 20030312080542 ACCESSION NUMBER: 0001145549-03-000269 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20030310 FILED AS OF DATE: 20030312 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KOREA ELECTRIC POWER CORP CENTRAL INDEX KEY: 0000887225 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 133442428 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13372 FILM NUMBER: 03600057 BUSINESS ADDRESS: STREET 1: 167, SAMSONG-DONG STREET 2: KANGNAM-KU CITY: SEOUL 135-7911 KOREA STATE: NY ZIP: 10286 BUSINESS PHONE: 2018948855 MAIL ADDRESS: STREET 1: 167 SAMSEENG DONG GANGNAMGU CITY: SEOUL STATE: MO ZIP: 999999999 6-K 1 u98408e6vk.txt KOREA ELECTRIC POWER CORPORATION SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 6-K REPORT OF FOREIGN PRIVATE ISSUER Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934 For the Month of March, 2003 KOREA ELECTRIC POWER CORPORATION (Translation of registrant's name into English) 167, Samseong-dong, Gangnam-gu, Seoul 135-791, Korea (Address of principal executive offices) (Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.) Form 20-F [X] Form 40-F [ ] (Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.) Yes [ ] No [X] (If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-_______.) This Report of Foreign Private Issuer on Form 6-K is deemed filed for all purposes under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, including by reference in the Registration Statement on Form F-3 (Registration No. 33-99550) and the Registration Statement on Form F-3 (Registration No. 333-9180). KOREA ELECTRIC POWER CORPORATION NON-CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2002 AND 2001 TOGETHER WITH INDEPENDENT PUBLIC ACCOUNTANTS' REPORT (as proposed to be approved at the Annual General Meeting of Shareholders on March 21, 2003) REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS English Translation of a Report Originally Issued in Korean To the Shareholders and Board of Directors of Korea Electric Power Corporation We have audited the accompanying non-consolidated balance sheets of Korea Electric Power Corporation (the "Company") as of December 31, 2002 and 2001, and the related non-consolidated statements of income, appropriations of retained earnings, and cash flows for the years then ended, all expressed in Korean Won. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of Korea Hydro & Nuclear Power Co., Ltd. and 3 other power generation subsidiaries, which statements reflect 30.4 percent of the total non-consolidated assets as of December 31, 2002 and 35.1 percent of non-consolidated income before income tax for the year ended. Also, we did not audit the financial statements of Korea Hydro & Nuclear Power Co., Ltd and 4 other power generating subsidiaries, which amounted to 32.8 percent of the total non-consolidated assets as of December 31, 2001 and 39.3 percent of non-consolidated income before income tax for the year ended. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to amounts included for those entities, is based solely on the reports of the other auditors. We conducted our audits in accordance with auditing standards, as established by the Financial Supervisory Commission of the Republic of Korea. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the non-consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, based on our audits and the reports of the other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2002 and 2001 and the results of its operations, changes in its retained earnings and its cash flows for the years then ended in conformity with the Korea Electric Power Corporation Act, the Accounting Regulations for Government Invested Enterprises and the Financial Accounting Standards as established by the Financial Supervisory Commission of the Republic of Korea (see Note 2). The translated amounts in the accompanying financial statements have been translated in to U.S. dollars, solely for the convenience of the reader, on the basis set forth in Note 2. As discussed in Note 20, the Company spun off its power generation division on April 2, 2001, in accordance with the approval of the shareholders on March 16, 2001, which resulted in establishing six new power generation subsidiaries, Korea Hydro & Nuclear Power Co., Ltd., Korea South-East Power Co., Ltd., Korea Midland Power Co., Ltd., Korea Western Power Co., Ltd., Korea Southern Power Co., Ltd. and Korea East-West Power Co., Ltd. As of April 2, 2001, their combined assets and liabilities were Won 35,131,773 million and Won 17,646,157 million, respectively. As discussed in Note 18, sales and purchases to and from related parties, including the six power generation subsidiaries, amounted to Won 371,643 million and Won 13,713,243 million, respectively, for the year ended December 31, 2002 and Won 287,358 million and Won 10,638,837 million, respectively, for the year ended December 31, 2001. Related receivables and payables amount to Won 31,954 million and Won 1,172,012 million, respectively, as of December 31, 2002 and Won 27,600 million and Won 1,117,322 million as of December 31, 2001, respectively. As discussed in Note 1, the Company will gradually privatize its power generation subsidiaries and distribution business by 2009, which is in accordance with the restructuring plan, dated January 21, 1999, of the electricity industry in the Republic of Korea announced by the Ministry of Commerce, Industry and Energy ("Restructuring Plan"). This Restructuring Plan, which is intended to introduce a competitive system in the electricity industry, is expected to affect the determination of utility rates, result in changes in management structure, related laws and regulations, and affect electricity supply and demand policy. Accounting principles and auditing standards and their application in practice vary among countries. The accompanying financial statements are not intended to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries other than the Republic of Korea. The Company's financial statements are prepared in accordance with the Korea Electric Power Corporation Act, Accounting Regulations for Government Invested Enterprises as well as generally accepted accounting principles in the Republic of Korea. In addition, the procedures and practices utilized in the Republic of Korea to audit such financial statements may differ from those generally accepted and applied in other countries. Accordingly, this report and the accompanying financial statements are for use by those knowledgeable about Korean accounting procedures and auditing standards and their application in practice as well as the Korea Electric Power Corporation Act and Accounting Regulations for Government Invested Enterprises. By:/s/ Anjin & Co. ------------------------------ Anjin & Co. Seoul, Korea February 7, 2003 Notice to Readers This report is effective as of February 7, 2003, the auditors' report date. Certain subsequent events or circumstances may have occurred between the auditors' report date and the time the auditors' report is read. Such events or circumstances could significantly affect the accompanying financial statements and may result in modifications to the auditors' report. KOREA ELECTRIC POWER CORPORATION NON-CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2002 AND 2001
TRANSLATION INTO KOREAN WON U.S. DOLLARS (NOTE 2) ----------------------------------- --------------------------------- 2002 2001 2002 2001 --------------- --------------- --------------- --------------- ASSETS (IN MILLIONS) (IN THOUSANDS) ------ Property, Plant and Equipment (Notes 3 and 4): Utility plant Won 34,432,036 Won 30,829,593 $ 28,683,801 $ 25,682,766 Less: accumulated depreciation (5,939,624) (4,503,772) (4,948,036) (3,751,892) Less: construction grants (2,321,138) (1,844,359) (1,933,637) (1,536,453) --------------- --------------- --------------- --------------- 26,171,274 24,481,462 21,802,128 20,394,421 Construction in-progress 1,986,138 2,677,439 1,654,563 2,230,455 --------------- --------------- --------------- --------------- 28,157,412 27,158,901 23,456,691 22,624,876 --------------- --------------- --------------- --------------- Investments and others: Investment securities (Note 5) 22,239,278 20,846,317 18,526,556 17,366,142 Long-term loans (Note 6) 128,656 114,707 107,178 95,557 Long-term other account receivables 388,924 -- 323,995 -- Currency and interest rate swaps (Note 13) 320,641 216,162 267,112 180,075 Intangibles (Note 16) 94,874 92,236 79,035 76,838 Other non-current assets (Note 12) 130,074 145,308 108,359 121,050 --------------- --------------- --------------- --------------- 23,302,447 21,414,730 19,412,235 17,839,662 --------------- --------------- --------------- --------------- Current assets: Cash and cash equivalents (Note 12) 610,056 559,871 508,211 466,404 Trade receivables, net of allowance for doubtful accounts of Won 21,588 million in 2002 and Won 18,548 million in 2001 (Notes 12 and 18) 1,400,411 1,300,665 1,166,620 1,083,526 Other account receivables, net of allowance for doubtful accounts of Won 3,007 million in 2002 and Won 2,383 million in 2001 (Notes 12 and 18) 228,101 187,816 190,020 156,461 Short-term financial instruments 79,000 119,587 65,811 99,622 Short-term loans (Note 6) 8,450 7,701 7,039 6,415 Inventories (Note 7) 65,217 68,885 54,329 57,385 Other current assets 94,519 82,559 78,741 68,777 --------------- --------------- --------------- --------------- 2,485,754 2,327,084 2,070,771 1,938,590 --------------- --------------- --------------- --------------- Total Assets Won 53,945,613 Won 50,900,715 $ 44,939,697 $ 42,403,128 =============== =============== =============== ===============
(continued) KOREA ELECTRIC POWER CORPORATION NON-CONSOLIDATED BALANCE SHEETS (CONTINUED) AS OF DECEMBER 31, 2002 AND 2001
TRANSLATION INTO KOREAN WON U.S. DOLLARS (NOTE 2) ----------------------------------- --------------------------------- 2002 2001 2002 2001 --------------- --------------- --------------- --------------- SHAREHOLDERS' EQUITY AND LIABILITIES (IN MILLIONS) (IN THOUSANDS) - ------------------------------------ Shareholders' equity (Note 8): Common stock Won 3,200,504 Won 3,200,504 $ 2,666,198 $ 2,666,198 Capital surplus 14,311,579 14,311,890 11,922,342 11,922,600 Retained earnings Appropriated 17,899,939 15,351,474 14,911,646 12,788,633 Unappropriated (Net income of Won 3,059,815 million in 2002 and Won 1,778,306 million in 2001) -- -- -- -- Capital adjustments: 35,707 130,887 29,745 109,036 --------------- --------------- --------------- --------------- Total Shareholders' Equity 35,447,729 32,994,755 29,529,931 27,486,467 --------------- --------------- --------------- --------------- Long-term liabilities: Long-term debt (Note 10) 9,973,313 11,702,675 8,308,325 9,748,979 Accrued severance indemnities, net (Note 2) 226,609 134,056 188,778 111,676 Reserve for self insurance 82,537 78,243 68,758 65,181 Currency and interest rate swaps (Note 13) 468,900 448,486 390,620 373,613 Financial lease liabilities (Note 11) 4,993 13,590 4,159 11,321 Deferred income tax liabilities (Note 17) 1,354,128 1,018,506 1,128,064 848,472 Other long-term liabilities 325,533 232,757 271,187 193,901 --------------- --------------- --------------- --------------- 12,436,013 13,628,313 10,359,891 11,353,143 --------------- --------------- --------------- --------------- Current liabilities: Trade payables (Note 18) 1,238,749 1,155,868 1,031,947 962,903 Other accounts payable (Note 18) 552,350 456,707 460,138 380,462 Current portion of long-term debt (Note 10) 2,454,722 1,358,240 2,044,920 1,131,490 Current portion of financial lease liabilities (Note 11) 8,538 9,522 7,113 7,932 Income tax payable 682,777 274,079 568,791 228,323 Accrued expenses 166,144 199,057 138,407 165,826 Dividends payable (Note 9) 513,503 353,610 427,777 294,577 Other current liabilities 445,088 470,564 370,782 392,005 --------------- --------------- --------------- --------------- 6,061,871 4,277,647 5,049,875 3,563,518 --------------- --------------- --------------- --------------- Total Liabilities 18,497,884 17,905,960 15,409,766 14,916,661 --------------- --------------- --------------- --------------- Total Shareholders' Equity and Liabilities Won 53,945,613 Won 50,900,715 $ 44,939,697 $ 42,403,128 =============== =============== =============== ===============
See accompanying notes to non-consolidated financial statements. KOREA ELECTRIC POWER CORPORATION NON-CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
TRANSLATION INTO KOREAN WON U.S. DOLLARS (NOTE 2) ----------------------------------- --------------------------------- 2002 2001 2002 2001 --------------- --------------- --------------- --------------- (IN MILLIONS, EXCEPT (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) PER SHARE AMOUNTS) OPERATING REVENUES (Note 18): Sale of electricity Won 20,716,297 Won 19,453,003 $ 17,257,829 $ 16,205,434 Other operating revenues 331,577 367,576 276,222 306,211 --------------- --------------- --------------- --------------- 21,047,874 19,820,579 17,534,051 16,511,645 --------------- --------------- --------------- --------------- OPERATING EXPENSES (Notes 14, 15, 16, 18 and 22): Power generation, transmission, distribution 3,365,041 6,042,913 2,803,266 5,034,083 Purchased power 14,532,830 10,602,206 12,106,656 8,832,228 Other operating costs 327,226 322,273 272,598 268,472 Selling and administrative expenses 940,016 891,024 783,086 742,272 --------------- --------------- --------------- --------------- 19,165,113 17,858,416 15,965,606 14,877,055 --------------- --------------- --------------- --------------- OPERATING INCOME 1,882,761 1,962,163 1,568,445 1,634,590 OTHER INCOME (EXPENSES): Interest income 23,710 31,475 19,752 26,220 Interest expense (627,954) (805,688) (523,121) (671,183) Gain (loss) on foreign currency transactions and translation, net 398,544 (16,775) 332,009 (13,974) Gain on valuation using the equity method of accounting (Note 5) 2,178,492 1,309,848 1,814,805 1,091,176 Gain (loss) on valuation of investments, net (1,244) 22,602 (1,036) 18,829 Gain on disposal of investment, net (Note 5) 433,151 162,384 360,839 135,275 Loss on disposal of utility plant, net (16,671) (16,352) (13,888) (13,622) Gain (loss) on repayment of bonds 14,151 (97,680) 11,789 (81,373) Valuation gain (loss) on currency and interest rate swaps, net (Note 13) 63,158 (132,008) 52,614 (109,971) Donations (Note 23) (76,825) (103,003) (64,000) (85,807) Rent 108,439 116,061 90,336 96,686 Other, net (51,419) 92,859 (42,835) 77,358 --------------- --------------- --------------- --------------- 2,445,532 563,723 2,037,264 469,614 --------------- --------------- --------------- --------------- ORDINARY INCOME 4,328,293 2,525,886 3,605,709 2,104,204 INCOME TAX EXPENSE (Note 17) 1,268,478 747,580 1,056,713 622,776 --------------- --------------- --------------- --------------- NET INCOME Won 3,059,815 Won 1,778,306 $ 2,548,996 $ 1,481,428 =============== =============== =============== =============== ORDINARY INCOME PER SHARE (Note 2) Won 4,788 Won 2,783 $ 3.99 $ 2.32 =============== =============== =============== =============== EARNINGS PER SHARE (Note 2) Won 4,788 Won 2,783 $ 3.99 $ 2.32 =============== =============== =============== ===============
See accompanying notes to non-consolidated financial statements. KOREA ELECTRIC POWER CORPORATION NON-CONSOLIDATED STATEMENTS OF APPROPRIATIONS OF RETAINED EARNINGS FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
TRANSLATION INTO KOREAN WON U.S. DOLLARS (NOTE 2) ----------------------------------- --------------------------------- 2002 2001 2002 2001 --------------- --------------- --------------- --------------- (IN MILLIONS) (IN THOUSANDS) RETAINED EARNINGS BEFORE APPROPRIATIONS: Unappropriated retained earnings carried over from prior years Won -- Won -- $ -- $ -- Net income 3,059,815 1,778,306 2,548,996 1,481,428 --------------- --------------- --------------- --------------- 3,059,815 1,778,306 2,548,996 1,481,428 --------------- --------------- --------------- --------------- APPROPRIATIONS OF RETAINED EARNINGS: Business rationalization reserve -- 1,000 -- 833 Reserve for business expansion 2,368,465 1,165,874 1,973,064 971,238 Reserve for investment in social overhead capital 120,000 200,000 99,967 166,611 Reserve for research and human development 60,000 60,000 49,982 49,983 Cash dividends (Note 9) 511,350 351,432 425,983 292,763 --------------- --------------- --------------- --------------- 3,059,815 1,778,306 2,548,996 1,481,428 --------------- --------------- --------------- --------------- UNAPPROPRIATED RETAINED EARNINGS TO BE CARRIED FORWARD TO SUBSEQUENT YEAR Won -- Won -- $ -- $ -- =============== =============== =============== ===============
See accompanying notes to non-consolidated financial statements. KOREA ELECTRIC POWER CORPORATION NON-CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
TRANSLATION INTO KOREAN WON U.S. DOLLARS (NOTE 2) ----------------------------------- --------------------------------- 2002 2001 2002 2001 --------------- --------------- --------------- --------------- (IN MILLIONS) (IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES: Net income Won 3,059,815 Won 1,778,306 $ 2,548,996 $ 1,481,428 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,741,967 2,558,682 1,451,155 2,131,524 Provision for severance and retirement benefits 92,915 80,532 77,403 67,088 Provision for decommissioning costs and self-insurance 5,465 140,383 4,553 116,947 Allowance for doubtful accounts 15,514 2,377 12,924 1,980 Interest expense 8,650 7,834 7,206 6,526 Loss (gain) on foreign currency transactions and translation, net (370,872) 15,521 (308,957) 12,930 Gain on valuation using the equity method of accounting (2,178,492) (1,309,848) (1,814,805) (1,091,176) Loss (gain) on valuation of investments, net 1,244 (22,602) 1,036 (18,829) Gain on disposal of investment, net (433,151) (162,384) (360,839) (135,275) Loss on disposal of utility plant, net 16,671 16,352 13,888 13,622 Loss (gain) on repayment of bonds (14,151) 97,680 (11,789) 81,373 Valuation loss (gain) on currency and interest rate swaps (63,158) 132,008 (52,614) 109,970 Decrease (increase) in trade receivables (109,221) 148,183 (90,988) 123,445 Decrease (increase) in other account receivables (20,915) 24,803 (17,423) 20,662 Decrease in inventories 43,910 146,032 36,579 121,653 Increase in other current assets (58,614) (24,230) (48,829) (20,185) Increase in deferred income tax assets -- (827,282) -- (689,172) Increase in trade payables 82,880 551,358 69,044 459,312 Increase (decrease) in other accounts payable 95,643 (616,948) 79,676 (513,952) Increase in income tax payable 408,698 121,732 340,468 101,410 Decrease in accrued expenses (30,317) (191,053) (25,256) (159,158) Increase (decrease) in other current liabilities (21,504) 49,723 (17,914) 41,422 Increase in deferred income tax liabilities 335,622 1,018,506 279,592 848,472 Increase in other long-term liabilities 92,774 121,189 77,286 100,957 Payment of severance and retirement benefits (6,692) (8,159) (5,575) (6,797) Payment of self-insurance (1,171) (1,736) (976) (1,446) Other, net (6,126) 5,046 (5,102) 4,204 --------------- --------------- --------------- --------------- Net cash provided by operating activities 2,687,384 3,852,005 2,238,739 3,208,935
(continued) KOREA ELECTRIC POWER CORPORATION NON-CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
TRANSLATION INTO KOREAN WON U.S. DOLLARS (NOTE 2) ----------------------------------- --------------------------------- 2002 2001 2002 2001 --------------- --------------- --------------- --------------- (IN MILLIONS) (IN THOUSANDS) CASH FLOWS FROM INVESTING ACTIVITIES: Disposal of utility plant Won 72,311 Won 55,426 $ 60,239 $ 46,173 Additions to utility plant (3,461,672) (4,790,220) (2,883,765) (3,990,520) Receipt of construction grants 624,527 560,246 520,266 466,716 Disposal of marketable securities -- 20,002 -- 16,663 Proceeds from disposal of investment securities 746,633 311,805 621,987 259,751 Acquisition of investment securities (31,621) (399,349) (26,342) (332,680) Collection of long-term loans -- 57,887 -- 48,223 Extension of long-term loans (22,567) (98,443) (18,800) (82,008) Acquisition of intangibles (30,790) (3,183) (25,650) (2,652) Withdrawal of short-term financial instruments 119,587 102,640 99,623 85,505 Acquisition of short-term financial instruments (79,000) (94,304) (65,811) (78,560) Collection of short-term loans 7,868 24,542 6,554 20,445 Decrease (increase) in other non-current assets 8,096 (31,744) 6,745 (26,445) --------------- --------------- --------------- --------------- Net cash used in investing activities (2,046,628) (4,284,695) (1,704,954) (3,569,389) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term debt 1,909,246 5,640,253 1,590,508 4,698,645 Payment of current portion of long-term debt (1,358,240) (4,263,766) (1,131,490) (3,551,954) Payment of long-term debt (760,084) -- (633,192) -- Payment of short-term borrowings -- (222,121) -- (185,039) Cash dividends (351,065) (333,358) (292,457) (277,706) Other, net (30,428) (6,433) (25,347) (5,359) --------------- --------------- --------------- --------------- Net cash provided by (used in) financing activities (590,571) 814,575 (491,978) 678,587 NET INCREASE IN CASH AND CASH EQUIVALENTS 50,185 381,885 41,807 318,133 CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD (Note 21) 559,871 177,986 466,404 148,271 --------------- --------------- --------------- --------------- CASH AND CASH EQUIVALENTS, END OF THE PERIOD (Note 21) Won 610,056 Won 559,871 $ 508,211 $ 466,404 =============== =============== =============== ===============
See accompanying notes to non-consolidated financial statements. KOREA ELECTRIC POWER CORPORATION. NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2002 AND 2001 1. THE COMPANY: Korea Electric Power Corporation (the "Company") was incorporated on January 1, 1982 in accordance with the Korea Electric Power Corporation Act (the "KEPCO Act") to engage in the generation, transmission and distribution of electricity and development of electric power resources. The Company was given a government investment status on December 31, 1983 following the enactment of the Government-Invested Enterprise Management Basic Act. The Company's stock was listed on the Korea Stock Exchange on August 10, 1989 and the Company listed its Depository Receipts (DR) on the New York Stock Exchange on October 27, 1994. As of December 31, 2002, the Government of the Republic of Korea, Korea Development Bank and foreign investors hold 32.35 percent, 21.57 percent and 25.07 percent of the Company's shares, respectively. The Company spun off its power generation division on April 2, 2001, resulting in the establishment of six new power generation subsidiaries. The Company will gradually privatize its power generation subsidiaries and distribution business by 2009, which is in accordance with the restructuring plan, dated January 21, 1999, of the electricity industry in the Republic of Korea announced by the Ministry of Commerce, Industry and Energy ("Restructuring Plan"). This Restructuring Plan, which is intended to introduce a competitive system in the electricity industry, is expected to affect the determination of utility rates, result in changes in management structure, related laws and regulations, and affect electricity supply and demand policy. In response to general unstable economic conditions, the Korean government and the private sector have been implementing structural reforms to historical business practices. Implementation of these reforms is progressing slowly, particularly in the areas of restructuring private enterprises and reforming the banking industry. The Korean government continues to apply pressure to Korean companies to restructure into more efficient and profitable firms. The Company may be either directly or indirectly affected by these general unstable economic conditions and the reform program described above. The accompanying financial statements reflect management's current assessment of the impact to date of the economic situation on the financial position of the Company. Actual results may differ materially from management's current assessment. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Basis of Financial Statement Presentation The Company maintains its official accounting records in Korean won and prepares statutory non-consolidated financial statements in the Korean language (Hangul) in conformity with the Accounting Regulations for Government Invested Enterprises, which have been approved by the Korean Ministry of Finance and Economy and, in the absence of specialized accounting regulations for utility companies, the accounting principles generally accepted in the Republic of Korea. Certain accounting principles applied by the Company that conform with financial accounting standards and accounting principles in the Republic of Korea may not conform with generally accepted accounting principles in other countries. Accordingly, the accompanying financial statements are intended for use by for those who are informed about Korean accounting principles and practices, Korea Electric Power Corporation Act and Accounting Regulations for Government Invested Enterprises. The accompanying financial statements have been condensed, restructured and translated into English (with certain expanded descriptions) from the Korean language financial statements. Certain information included in the Korean language financial statements, but not required for a fair presentation of the Company's financial position and results of operations, is not presented in the accompanying financial statements. The US dollar amounts presented in these financial statements were computed by translating the Korean won into US dollars based on the Bank of Korea Basic Rate of Won 1,200.40 to US $1.00 at December 31, 2002, solely for the convenience of the reader. This convenience translation into US dollars should not be construed as representations that the Korean won amounts have been, could have been, or could in the future be, converted at this or any other rate of exchange. The significant accounting policies followed by the Company in the preparation of its non-consolidated financial statements are summarized below. Property, Plant and Equipment Property, plant and equipment are stated at cost, except for assets revalued upward in accordance with the KEPCO Act and the Assets Revaluation Law of Korea, net of depreciation. Expenditures that result in the enhancement of the value or extension of the useful life of the utility plants involved are capitalized as additions to property, plant and equipment. The Company capitalizes interest and other borrowing costs on debt issued to finance capital expenditures as part of the acquisition cost of major facilities and equipment. For the years ended December 31, 2002 and 2001, the amount of capitalized interest was Won 74,382 million and Won 376,815 million, respectively, of which foreign currency transactions and translation gains deducted from the capitalized interest amounted to Won 53,382 million and Won 68,388 million, respectively, and foreign currency transactions and translation losses added to the capitalized interest amounted to Won 1,850 million and Won 135,635 million, respectively. Depreciation is computed using the declining-balance method (straight-line method for buildings and structures) based on the estimated useful lives described in the Korean Corporate Income Tax Law and as permitted under the Accounting Regulations for Government Invested Enterprises as follows:
YEARS -------- Buildings 15,30 Structures 15,30 Machinery 16 Ships 9 Vehicles 4 Others 4
The Company records the following funds and materials, which relate to the construction of transmission and distribution facilities as construction grants: o Grants from the government or public institutions o Funds, construction materials or other items contributed by customers Construction grants are initially recorded and presented in the accompanying financial statements as deductions from the assets acquired under such grants and are offset against depreciation expense during the estimated useful lives of the related assets. The Company received Won 624,527 million and Won 560,246 million of construction grants, and offset Won 140,346 million and Won 65,629 million against depreciation expense for the years ended December 31, 2002 and 2001, respectively. Accounting for Leases Lease agreements that include a bargain purchase option, result in the transfer of ownership by the end of the lease term, have a term equal to at least 75 percent of the estimated economic life of the leased property or where the present value of the minimum lease payments at the beginning of the lease term equals or exceeds 90 percent of the fair value of the leased property are accounted for as financial or capital leases. All other leases are accounted for as operating leases. Assets and liabilities related to financial leases are recorded as property and equipment and long term debt, respectively, and the related interest is calculated using the effective interest rate method. In respect to operating leases, the future minimum lease payments are expensed ratably over the lease term while contingent rentals are expensed as incurred. -2- Valuation of Marketable Securities and Investment Securities Marketable securities are recorded at purchase price cost plus incidental costs. However, if the fair value differs from the book value determined using the weighted average method, the securities are stated at fair value and the valuation gain or loss is reflected in current operations. Investments in equity securities (excluding those accounted for using the equity method discussed in the next paragraph) that are not actively traded (unlisted security) are stated at acquisition cost, determined using the weighted average method. Actively quoted (listed) securities, including those traded over-the-counter, are stated at fair value, with valuation gain or loss reported as a capital adjustment within shareholders' equity. If the fair value of a listed equity security or the net equity value of an unlisted security held for investment declines compared to acquisition cost and is not expected to recover (impaired investment security), the carrying value of the equity security is adjusted to fair value or net equity value, with the resulting valuation loss charged to current operations. If the net equity value or fair value subsequently recovers, in the case of an unlisted security, the increase in value is recorded in current operations, up to the amount of the previously recognized impairment loss, and in the case of a listed security, the increase in value is accounted for as a valuation gain in capital adjustment within shareholders' equity. Investments in equity securities of companies in which the Company is able to exercise significant influence over the operating and financial policies of the investees are accounted for using the equity method. The change in the Company's share of an investee's net equity resulting from a change in an investee's net equity is reflected in current operations, retained earnings, and capital adjustment in accordance with the causes of the change which consist of the investee's net income (loss), changes in retained earnings and changes in capital surplus and capital adjustments. Investments in debt securities are classified as either held-to-maturity investment debt securities or available for sale investment debt securities at the time of purchase. Held-to-maturity investment debt securities are stated at acquisition cost, as determined using the weighted average method. When the face value of a held-to-maturity investment debt security differs from its acquisition cost, the effective interest method is applied to amortize the difference over the remaining term of the security. Available-for-sale investment debt securities are stated at fair value, with the resulting valuation gain or loss recorded as a capital adjustment. If the fair value of a held-to-maturity or an available-for-sale investment debt security declines compared to the acquisition cost and is not expected to recover (impaired investment security), the carrying value of the debt security is adjusted to fair value, with the resulting valuation gain or loss charged to current operations. If the fair value of the security subsequently recovers, in the case of a held-to maturity debt security, the increase in value is recorded in current operations, up to the amount of the previously recognized impairment loss, and in the case of an available-for-sale debt security, the increase in value is accounted for as a valuation gain in capital adjustment within shareholders' equity. The lower of the acquisition cost of investments in the treasury stock funds and the fair value of treasury stock included in a fund is recorded as treasury stock in capital adjustment. Intangibles Intangible assets are stated at cost, net of accumulated amortization computed using the straight-line method over the estimated useful lives, from 4 years to 20 years, of related assets. Allowance for Doubtful Accounts The Company provides an allowance for doubtful accounts based on management's estimate of the collectibility of individual accounts and prior year collection experience. Inventories Inventories are stated at the lower of cost or net realizable value, cost being determined using the weighted average method for raw materials, moving average method for supplies and specific identification method for other inventories. The Company maintains perpetual inventory records, which are adjusted through physical counts. -3- Discount on Debentures Discounts on debentures issued are amortized over the redemption period of debentures using the effective interest rate method. Amortization of discounts is recognized as interest expense. Accrued Severance Indemnities Employees and directors with more than one year of service are entitled to receive a lump-sum payment upon termination of their service with the Company, based on their length of service and rate of pay at the time of termination. The accrued severance indemnities that would be payable assuming all eligible employees were to resign are Won 226,708 million and Won 134,173 million as of December 31, 2002 and 2001, respectively. Actual severance payments were Won 6,692 million and Won 8,159 million for the years ended December 31, 2002 and 2001, respectively. Before April 1999, the Company and its employees paid 3 percent and 6 percent, respectively, of monthly pay (as defined) to the National Pension Fund in accordance with the National Pension Law of Korea. The Company paid half of the employees' 6 percent portion and is paid back at the termination of service by offsetting the receivable against the severance payments. Such receivables, with a balance of Won 99 million and Won 117 million as of December 31, 2002 and 2001, respectively, are presented as a deduction from accrued severance benefits. Starting April 1999, the Company and its employees each pay 4.5 percent of monthly pay to the Fund under the revised National Pension Law of Korea. In 2001, accrued severance indemnities of Won 58,063 million for the directors and employees who were transferred to the power generation subsidiaries were transferred to those subsidiaries. Reserve for Self-Insurance The Company provides a self-insurance reserve for liability to third parties that may arise in connection with the Company's non-insured facilities. Payments made to settle applicable claims are charged to this reserve. Foreign Currency Transactions and Translation The Company maintains its accounts in Korean won. Transactions in foreign currencies are recorded in Korean won based on the prevailing rates of exchange on the transaction date. Monetary assets and liabilities with balances denominated in foreign currencies are recorded and reported in the accompanying financial statements at the exchange rates prevailing at the balance sheet date. The balances have been translated using the Bank of Korea Basic Rate, which was Won 1,200.40 and Won 1,326.10 to US$ 1.00 at December 31, 2002 and 2001, respectively. The translation gains or losses are reflected in current operations. Accounting for Derivative Instruments All derivative instruments are accounted for at fair value with the valuation gain or loss recorded as an asset or liability. If the derivative instrument is not part of a transaction qualifying as a hedge, the adjustment to fair value is reflected in current operations. The accounting for derivative transactions that are part of a qualified hedge based both on the purpose of the transaction and on meeting the specified criteria for hedge accounting differs depending on whether the transaction is a fair value hedge or a cash flow hedge. Fair value hedge accounting is applied to a derivative instrument designated as hedging the exposure to changes in the fair value of an asset or a liability or a firm commitment (hedged item) that is attributable to a particular risk. The gain or loss both on the hedging derivative instruments and on the hedged item attributable to the hedged risk is reflected in current operations. Cash flow hedge accounting is applied to a derivative instrument designated as hedging the exposure to variability in expected future cash flows of an asset or a liability or a forecasted transaction that is attributable to a particular risk. The effective portion of gain or loss on a derivative instrument designated as a cash flow hedge is recorded as a capital adjustment and the ineffective portion is recorded in current operations. The effective portion of gain or loss recorded as a capital adjustment is reclassified to current earnings in the same period during which the hedged forecasted transaction affects earnings. If the hedged transaction results in the acquisition of an asset or the incurrence of a liability, the gain or loss in capital adjustment is added to or deducted from the asset or the liability. -4- Revenue Recognition The Company recognizes revenue from the sale of electric power based on meter readings made on a monthly basis. The Company does not accrue revenue for power sold after the meter readings but prior to the end of the accounting period. The Company recognizes revenue on long-term contacts, which are related to the construction of power plants in the Democratic Peoples Republic of Korea (North Korea), based on the percentage-of-completion method. Income Tax Expense The Company recognizes deferred income taxes arising from temporary differences between pretax accounting income and taxable income. Accordingly, the provision for income tax expense consists of the corporate income tax and resident tax surcharges currently payable, and the changes in deferred income tax assets and liabilities during the period. However, deferred income tax assets are recognized only if the future tax benefits on accumulated temporary differences are realizable. The deferred income tax assets and liabilities will be charged or credited to income tax expense in the period each temporary difference reverses in the future. Deferred income taxes will be recalculated based on the actual tax rate in effect at each balance sheet date. Ordinary Income Per Share and Earnings Per Share Ordinary income per share and earnings per share are computed by dividing ordinary income (after deduction for tax effect) and net income by the weighted average number of common shares outstanding during the period. The number of shares used in computing earnings and ordinary income per share is 639,046,001 shares and 638,975,080 shares for the years ended December 31, 2002 and 2001, respectively. 3. PROPERTY, PLANT AND EQUIPMENT: (1) Asset revaluation The Company has revalued its property, plant and equipment in accordance with the KEPCO Act and the Asset Revaluation Law (the latest revaluation date was January 1, 1999). The gain from the asset revaluation was Won 12,552,973 million (See Note 8). (2) Publicly announced land prices The published price of the Company's land as announced by the Korean Government is as follows (won in millions):
AREA PURPOSE (SQUARE METERS) BOOK VALUE LAND PRICES -------------------------------------------- ----------------- ---------------- ---------------- Transmission and distribution sites and other 16,846,287 Won 3,321,377 Won 2,984,974
(3) Utility plant Utility plant as of December 31, 2002 and 2001 is as follows (won in millions):
2002 2001 --------------- --------------- Land Won 3,321,377 Won 3,372,285 Buildings 2,135,878 1,951,033 Structures 22,415,717 20,220,976 Machinery 6,266,774 5,019,457 Ships 266 266 Vehicles 55,334 51,454 Others 236,690 214,122 --------------- -------------- Won 34,432,036 Won 30,829,593 =============== ==============
-5- 4. INSURED ASSETS: Insured assets as of December 31, 2002 are as follows (won in millions):
INSURED ASSETS INSURANCE TYPE INSURED VALUE ----------------------------- -------------------------------- -------------- Buildings and machinery Fire insurance Won 325,670 Buildings and machinery Assemble insurance 365,312 Buildings General insurance 147,187 Construction in progress Construction insurance 141,404
In addition, the Company carries damage insurance for its light water nuclear reactor construction in North Korea, general insurance for vehicles, loading insurance for inventories, general insurance for movables, casualty insurance for its employees and compensation liability insurance for its directors. 5. INVESTMENT SECURITIES: (1) Investment securities as of December 31, 2002 and 2001 are as follows (won in millions):
2002 2001 ----------------- ----------------- Securities subject to equity method Won 22,152,733 Won 20,755,138 Non-listed equity securities 75,598 83,442 Others 10,947 7,737 ----------------- ----------------- Won 22,239,278 Won 20,846,317 ================= =================
(2) Securities subject to the equity method as of December 31, 2002 and 2001 are as follows (won in millions):
2002 2001 -------------------------------------------------------------- ---------------------------- OWNERSHIP ACQUISITION NET ASSET VALUE PER OWNERSHIP VALUE PER COMPANY NAME (%) COST VALUE EQUITY METHOD (%) EQUITY METHOD - ---------------------------------- ---------- -------------- -------------- --------------- ---------- --------------- Korea Hydro & Nuclear Power Co., Ltd. 100.0 Won 9,364,799 Won 10,577,527 Won 10,577,527 100.0 Won 9,930,683 Korea South-East Power Co., Ltd. 100.0 1,232,004 1,679,117 1,679,117 100.0 1,398,275 Korea Midland Power Co., Ltd. 100.0 1,325,891 1,781,127 1,781,127 100.0 1,482,997 Korea Western Power Co., Ltd. 100.0 1,442,638 1,772,973 1,772,973 100.0 1,573,395 Korea Southern Power Co., Ltd. 100.0 1,797,378 1,953,743 1,953,743 100.0 1,813,187 Korea East-West Power Co., Ltd. 100.0 2,322,905 2,373,207 2,373,207 100.0 2,295,361 Korea Power Engineering Co., Ltd. 97.9 4,991 171,466 51,991 97.9 46,352 Korea Plant Service & Engineering Co., Ltd. 100.0 6,000 238,947 238,947 100.0 212,431 KEPCO Nuclear Fuel Co., Ltd. 96.4 89,757 150,100 134,538 96.4 119,555 Korea Electric Power Data Network Co., Ltd. 100.0 64,000 120,476 118,075 100.0 112,209 Korea Electric Power Industrial Development, Ltd. 100.0 16,300 40,730 40,730 100.0 34,879 Korea Gas Corporation 24.5 94,500 690,705 690,705 24.5 698,164 Korea District Heating Co. 26.1 5,660 147,898 147,898 26.1 134,955 Powercomm Corporation (*) 44.0 329,965 359,090 359,090 89.5 718,126 KEPCO International Hong Kong Ltd. 100.0 15,102 124,809 124,809 100.0 87,647 KEPCO International Philippines Inc. (*) 100.0 103,610 108,256 108,256 100.0 96,922 ------------- -------------- -------------- -------------- Won 18,215,500 Won 22,290,171 Won 22,152,733 Won 20,755,138 ============= ============== ============== ==============
(*) The Company used draft financial statement of Powercomm Corporation and KEPCO International Philippines Inc. for equity method valuation. -6- If the difference between the cost of acquisition and the book value of the subsidiary is a positive goodwill, the difference is amortized using the straight-line method over five years from the year it was acquired, and if it is a negative goodwill, the difference related to the depreciable assets is amortized over the weighted average useful life of related assets from the year it was acquired and the difference related to the non-depreciable assets is amortized at the time assets are disposed of. Unrealized income from intercompany transactions is eliminated. The Company eliminates the unrealized gains arising from the transactions with affiliates in equity method valuation. The eliminated gain arising from the transaction with Korea Power Engineering Co., Ltd, KEPCO Nuclear Fuel Co., Ltd. and Korea Electric Power Data Network Co., Ltd. amounted to Won 119,475 million, Won 15,562 million and Won 2,401 million, respectively, as of December 31,2002 and Won 112,463 million, Won 17,877 million and Won 5,845 million, respectively, as of December 31, 2001. In 2002, the Company has disposed some of its investments in Powercomm Corporation, with the gain on disposal of investment of Won 433,335 million. As KEPCO International Hong Kong Ltd. owns 100 percent of the shares of KEPCO Philippines Corporation ("KEPHILCO") and KEPCO International Philippines Inc. holds 51 percent of the shares of KEPCO Ilijan Corporation ("KEILCO"), the Company applied the equity method for KEPCO International Hong Kong Ltd. and KEPCO International Philippines Inc., reflecting the changes in the net equity of KEPHILCO and KEILCO. In 2002, the Company acquired additional share of KEPCO International Philippines Inc. amounting to Won 12,453 million. The Company recorded Won 2,178,492 million and Won 1,309,848 million as valuation gain using the equity method for the years ended December 31, 2002 and 2001, respectively. Details of valuation using the equity method are as follows (won in millions):
2002 ---------------------------------------------------------- GAIN ON VALUATION USING THE BOOK VALUE AS EQUITY METHOD BOOK VALUE AS OF JANUARY 1, OF OF DECEMBER COMPANY NAME 2002 ACCOUNTING OTHERS(*) 31, 2002 - ------------------------ ------------- ------------- ------------- -------------- Korea Hydro & Nuclear Power Co., Ltd. Won 9,930,683 Won 816,577 Won (169,733) Won 10,577,527 Korea South-East Power Co., Ltd. 1,398,275 305,795 (24,953) 1,679,117 Korea Midland Power Co., Ltd. 1,482,997 321,073 (22,943) 1,781,127 Korea Western Power Co., Ltd. 1,573,395 229,494 (29,916) 1,772,973 Korea Southern Power Co., Ltd. 1,813,187 146,893 (6,337) 1,953,743 Korea East-West Power Co., Ltd. 2,295,361 73,621 4,225 2,373,207 Korea Power Engineering Co., Ltd. 46,352 30,623 (24,984) 51,991 Korea Plant Service & Engineering Co., Ltd. 212,431 33,116 (6,600) 238,947 KEPCO Nuclear Fuel Co., Ltd. 119,555 14,983 -- 134,538 Korea Electric Power Data Network Co., Ltd. 112,209 14,911 (9,045) 118,075 Korea Electric Power Industrial Development, Ltd. 34,879 8,751 (2,900) 40,730 Korea Gas Corporation 698,164 63,370 (70,829) 690,705 Korea District Heating Co. 134,955 14,154 (1,211) 147,898 Powercomm Corporation 718,126 35,400 (394,436) 359,090 KEPCO International Hong Kong Ltd. 87,647 55,409 (18,247) 124,809 KEPCO International Philippines Inc. 96,922 14,322 (2,988) 108,256 ------------- -------------- ------------ -------------- Won 20,755,138 Won 2,178,492 Won (780,897) Won 22,152,733 ============= ============== ============ ==============
2001 ---------------------------------------------- GAIN ON VALUATION USING THE BOOK VALUE AS EQUITY METHOD OF JANUARY OF COMPANY NAME 1, 2001 ACCOUNTING OTHERS(*) - ------------------------ --------------- ------------- ------------- Korea Hydro & Nuclear Power Co., Ltd. Won -- Won 565,884 Won 9,364,799 Korea South-East Power Co., Ltd. -- 166,271 1,232,004 Korea Midland Power Co., Ltd. -- 157,106 1,325,891 Korea Western Power Co., Ltd. -- 130,757 1,442,638 Korea Southern Power Co., Ltd. -- 15,808 1,797,379 Korea East-West Power Co., Ltd. -- (27,544) 2,322,905 Korea Power Engineering Co., Ltd. 30,973 18,579 (3,200) Korea Plant Service & Engineering Co., Ltd. 182,694 63,952 (34,215) KEPCO Nuclear Fuel Co., Ltd. 108,166 10,101 1,288 Korea Electric Power Data Network Co., Ltd. 108,369 9,913 (6,073) Korea Electric Power Industrial Development, Ltd. 27,462 10,087 (2,670) Korea Gas Corporation 584,137 163,517 (49,490) Korea District Heating Co. 176,643 (40,844) (844) Powercomm Corporation 684,484 20,630 13,012 KEPCO International Hong Kong Ltd. 79,168 39,394 (30,915) KEPCO International Philippines Inc. 106,542 6,237 (15,857) -------------- ------------ -------------- Won 2,088,638 Won 1,309,848 Won 17,356,652 ============== ============ ==============
-7- (*) Others are composed of acquisition (disposal) amounts of investment securities, dividends and the changes in investment securities in capital adjustments. (3) Non-listed equity securities as of December 31, 2002 and 2001 are as follows (won in millions):
2002 2001 ----------------------------------------------- ------------------------------- OWNERSHIP ACQUISITION OWNERSHIP COMPANY NAME (%) COST BOOK VALUE (%) BOOK VALUE - ------------------------------------- ------------- -------------- -------------- -------------- ------------- Securities Market Stabilization Fund 7.57 Won 20,743 Won 20,743 7.19 Won 47,755 Energy Savings Investment Cooperative 40.6 5,000 5,000 40.6 5,000 Korea Power Exchange 50.0 49,855 49,855 50.0 30,687 ---------- ----------- ----------- Won 75,598 Won 75,598 Won 83,442 ========== =========== ===========
The Company invested in Korea Power Exchange, which was established to facilitate the electricity transactions between the Company and the power generation subsidiaries. (4) Other investments as of December 31, 2002 and 2001 are as follows (won in millions):
2002 2001 -------------------------------- ------------- FACE VALUE BOOK VALUE BOOK VALUE -------------- --------------- ------------- Government and municipal bonds Won 55 Won 55 Won 84 Hwan Young Steel Co., Ltd. 1,364 120 -- Investment securities in Treasury Stock Fund -- 10,772 7,653 ------------- ------------- ------------- Won 1,419 Won 10,947 Won 7,737 ============= ============= =============
The Company entered into a Treasury Stock Fund, composed of treasury stock and other investment securities. Investment securities other than treasury stock in the fund and its related losses on valuation of investment, which are recorded in capital adjustment, amount to Won 10,772 million and Won 8,509 million, respectively, as of December 31, 2002 and Won 7,653 million and Won 3,998 million, respectively, as of December 31, 2001. (5) Gain on valuation of investment, which are recorded in capital adjustment as of December 31, 2002 and 2001 are as follows (won in millions):
2002 2001 ------------- ------------- Valuation using the equity method Won 60,886 Won 159,494 Investment securities in Treasury Stock Fund (8,509) (3,998) ------------- ------------- Won 52,377 Won 155,496 ============= =============
6. LOANS TO EMPLOYEES: The Company has provided housing and tuition loans to employees as follows (won in million):
2002 2001 ------------------ ----------------- Short-term loans Won 8,450 Won 7,701 Long-term loans 128,656 114,707 ------------------ ----------------- Won 137,106 Won 122,408 ================== =================
-8- 7. INVENTORIES: Inventories as of December 31, 2002 and 2001 consist of the following (won in millions):
2002 2001 ------------------ ----------------- Raw materials Won 1,291 Won 1,509 Supplies 57,169 60,602 Other 6,757 6,774 ----------------- ---------------- Won 65,217 Won 68,885 ================= ================
8. SHAREHOLDERS' EQUITY: (1) Capital The Company has 1,200,000,000 authorized shares of Won 5,000 par value common stock, of which 640,100,876 shares are issued as of December 31, 2002. (2) Capital Surplus Capital surplus as of December 31, 2002 and 2001 is as follows (won in millions):
2002 2001 ------------------- ------------------- Paid-in capital in excess of par value Won 799,876 Won 799,876 Reserves for asset revaluation 12,552,973 12,552,973 Other capital surplus 958,730 959,041 ------------------- ------------------- Won 14,311,579 Won 14,311,890 =================== ===================
The Company revalued its property, plant and equipment in accordance with the KEPCO Act and the Asset Revaluation Law, and recorded a revaluation gain of Won 12,552,973 million as a reserve for asset revaluation. The reserve for asset revaluation may be credited to paid-in capital or offset against any accumulated deficit by resolution of the shareholders. (3) Retained earnings Appropriated retained earnings as of December 31, 2002 and 2001 consist of the following (won in millions):
2002 2001 ------------------- ----------------- Legal reserve Won 1,600,252 Won 1,600,252 Reserve for business rationalization 31,900 31,900 Reserve for business expansion 10,925,338 8,556,873 Reserve for investment on social overhead capital 5,012,449 4,892,449 Reserve for research and human development 120,000 60,000 Voluntary reserve 210,000 210,000 ------------------- ----------------- Won 17,899,939 Won 15,351,474 =================== ================
The KEPCO Act requires the Company to appropriate a legal reserve equal to at least 20 percent of net income for each accounting period until the reserve equals 50 percent of the common stock. In accordance with the Tax Incentive Control Law, the amount of tax benefit associated with certain exemptions and tax credits must be appropriated as a reserve for business rationalization. Prior to 1990, according to the KEPCO Act, at least 20 percent of net income in each fiscal year was required to be established as a reserve for business expansion until such reserve equals the common stock. Beginning in 1990, no percentage was specified in respect to this reserve and appropriations became optional. The legal reserve is not available for cash dividends; however, this reserve may be credited to paid-in capital or offset against accumulated deficit by the resolution of the shareholders. The reserve for the investment on social overhead capital and research and human development is appropriated by the Company to avail itself of qualified tax credits to reduce corporate tax liabilities. This reserve is not available for cash dividends for a certain period as defined in the Tax Incentive Control Law. -9- (4) Capital adjustments Capital adjustments as of December 31, 2002 and 2001 are as follows (won in millions):
2002 2001 --------------- --------------- Treasury stock Won (16,670) Won (24,609) Gain on valuation of investments 52,377 155,496 --------------- --------------- Won 35,707 Won 130,887 =============== ===============
The Company has shares held as treasury stock amounting to Won 16,670 million (913,375 shares) and Won 24,609 million (1,134,053 shares) as of December 31, 2002 and 2001, respectively, for the purpose of stock price stabilization. This treasury stock is included in the Treasury Stock Fund. 9. DIVIDENDS: Dividends as of December 31, 2002 and 2001 are as follows (won in millions, except per share data): (1) Earnings available for dividend
2002 2001 -------------- ------------- Retained earnings before appropriation Won 3,059,815 Won 1,778,306 Transfer from the voluntary reserve -- -- Appropriation of the legal reserve and others (2,548,465) (1,426,874) Other appropriation of retained earnings -- -- -------------- ------------- Earnings available for dividends Won 511,350 Won 351,432 ============== =============
(2) Dividend
OUTSTANDING DIVIDEND DIVIDEND STOCKS RATE PER SHARE TOTAL DIVIDEND ------------ -------- ------------ -------------- 2002: Outstanding stocks other than treasury stock 639,187,501 16% Won 800 Won 511,350 Treasury stock 913,375 -- -- -- ------------ ------------ 640,100,876 Won 511,350 ============ ============ 2001: Outstanding stocks other than treasury stock 638,966,823 11% Won 550 Won 351,432 Treasury stock 1,134,053 -- -- -- ------------ ------------ 640,100,876 Won 351,432 ============ ============
(3) Dividend to net income ratio (won in millions)
2002 2001 -------------- -------------- Dividend Won 511,350 Won 351,432 Net income 3,059,815 1,778,306 -------------- -------------- Dividend to net income ratio Won 16.71% Won 19.76% ============== ==============
(4) Dividend yield ratio
2002 2001 -------------- -------------- Dividend per share Won 800 Won 550 Stock price at the end of year Won 18,250 Won 21,700 -------------- -------------- Dividend yield ratio 4.38% 2.53% ============== ==============
-10- 10. BORROWINGS AND DEBENTURES: (1) Long-term borrowings as of December 31, 2002 and 2001 are as follows (won in millions): (a) Long-term borrowings denominated in Korean Won
ANNUAL INTEREST FINANCIAL INSTITUTION TYPE RATE (%) 2002 2001 ------------------------------- ------------------- ---------------- -------------- -------------- Korea Development Bank Industrial facility 5.42~9.00 Won 2,591,564 Won 2,085,409 Kookmin Bank General 6.07~6.16 85,714 127,619 Korea National Oil Development Corporation '' 9.00 -- 1,500 Others '' 5.50~6.00 37 38 --------------- -------------- 2,677,315 2,214,566 Less: Current portion (629,522) (187,292) --------------- -------------- Won 2,047,793 Won 2,027,274 =============== ==============
(b) Long-term borrowings denominated in foreign currency
ANNUAL INTEREST FINANCIAL INSTITUTION TYPE RATE (%) 2002 2001 ------------------------------- ------------------- ---------------- -------------- -------------- Japan Bank of International Cooperation Commercial 2.27 Won -- Won 929,040 Barclays International Financial Services (Ireland) Ltd. '' 6M Libor-1.00 376,482 414,193 Kredit Anstalt Fur Wieder Aufbau Facility 6.00 180 753 Asia Development Bank '' 6.00 1,415 2,248 -------------- -------------- 378,077 1,346,234 Less: Current portion (189,836) (156,074) -------------- -------------- Won 188,241 Won 1,190,160 ============== ==============
(2) Debentures as of December 31, 2002 and 2001 are as follows (won in millions):
ANNUAL INTEREST RATE (%) 2002 2001 ----------------- ------------------ ----------------- Domestic debentures (Electricity bonds) 5.19~11.30 Won 2,755,000 Won 2,665,000 Foreign debentures 1.18~8.28 6,637,477 6,855,959 ----------------- ---------------- 9,392,477 9,520,959 Less: Current portion (1,635,364) (1,014,874) Discount on debentures issued (19,834) (20,844) ----------------- ---------------- Won 7,737,279 Won 8,485,241 ================= ================
-11- (3) Foreign currency debts, by currency, as of December 31, 2002 and 2001 are as follows (won in millions):
2002 2001 ----------------------------------------- ---------------------------------------- FOREIGN CURRENCY WON EQUIVALENT FOREIGN CURRENCY WON EQUIVALENT --------------------- ---------------- ---------------------- ---------------- Long-term borrowings US$ 301,179,115 Won 377,897 US$ 301,695,125 Won 416,440 EUR 143,104 180 JPY 92,038,852,176 929,040 DEM 1,255,887 754 -------------- -------------- 378,077 1,346,234 -------------- -------------- Debentures US$ 3,980,542,219 4,785,584 US$ 3,562,868,653 4,684,319 JPY 175,060,000,000 1,773,130 JPY 205,060,000,000 2,069,876 EUR 25,183,000 31,664 EUR 25,183,000 29,530 GBP 24,467,000 47,099 GBP 24,467,000 47,053 DEM 42,000,000 25,181 -------------- -------------- 6,637,477 6,855,959 -------------- -------------- Won 7,015,554 Won 8,202,193 ============== ==============
(4) Aggregate maturities of the Company's long-term debt as of December 31, 2002 are as follows (won in millions):
LOCAL FOREIGN YEAR ENDED CURRENCY CURRENCY ELECTRICITY FOREIGN DECEMBER 31 BORROWINGS BORROWINGS BONDS DEBENTURES TOTAL -------------- -------------- -------------- --------------- -------------- ---------------- 2003 Won 629,522 Won 189,836 Won 10,000 Won 1,625,364 Won 2,454,722 2004 710,590 188,241 2,120,000 918,156 3,936,987 2005 689,441 - 240,000 1,201,766 2,131,207 2006 537,173 - 200,000 315,573 1,052,746 2007 93,371 - 185,000 1,240,924 1,519,295 Thereafter 17,218 - - 1,335,694 1,352,912 -------------- -------------- -------------- -------------- ---------------- Won 2,677,315 Won 378,077 Won 2,755,000 Won 6,637,477 Won 12,447,869 ============== ============== ============== ============== ================
11. LEASES: (1) The Company entered into a financial lease agreement with Korea Development Leasing Corporation for certain computer systems, of which the acquisition cost is Won 33,870 million and Won 34,111 million as of December 31, 2002 and 2001, respectively. Depreciation of the leased assets amounted to Won 10,235 million and Won 11,432 million for the years ended December 31, 2002 and 2001, respectively. (2) Annual payments under these lease agreements as of September 30, 2002 are as follows (won in millions):
AMOUNT --------------------------------------- YEAR ENDING DECEMBER 31 FINANCIAL LEASE OPERATING LEASE --------------------------- ----------------- ----------------- 2003 Won 9,292 Won 3,917 2004 2,106 1,164 2005 1,977 -- Thereafter 989 -- ---------------- ---------------- 14,364 5,081 Less: Interest (833) -- Current portion (8,538) -- ---------------- ---------------- Won 4,993 Won 5,081 ================ ================
-12- 12. FOREIGN CURRENCY DENOMINATED ASSETS AND LIABILITIES: There are no significant liabilities denominated in foreign currency other than those mentioned in Note 10 and significant assets denominated in foreign currency as of December 31, 2002 and 2001 are as follows (won in millions):
2002 2001 ---------------------------------- --------------------------------- FOREIGN EQUIVALENT FOREIGN EQUIVALENT ACCOUNT CURRENCIES KOREAN WON CURRENCIES KOREAN WON ------------------------------- ------------------ ------------- ----------------- -------------- Cash and cash equivalents US$ 16,395,438 Won 19,681 US$ 3,547,221 Won 4,704 Trade receivables US$ 3,497,537 4,198 US$ 17,563,698 23,291 Other account receivables US$ 644,263 773 US$ 3,225,048 4,277 Other non-current assets US$ 11,560 14 US$ 11,560 15 '' JPY 5,859,783 59 JPY 5,859,783 78 ------------- ------------- Won 24,725 Won 32,365 ============= =============
13. SWAP TRANSACTIONS: (1) Currency swap contracts as of December 31, 2002 are as follows (foreign currency in millions):
CONTRACT AMOUNTS IN MILLIONS CONTRACT INTEREST RATE PER ANNUM CONTRACT SETTLEMTNT ---------------------------- -------------------------------- YEAR YEAR PAY RECEIVE PAY (%) RECEIVE (%) ------- ---------- ------------- -------------- --------------- --------------- The Sumitomo Bank Ltd. 1995 2005 US$ 286 JPY 27,000 7.68 4.15 The Fuji Bank, Ltd. 1995 2005 US$ 149 JPY 14,425 Libor+0.155 3.40 Canadian Imperial Bank of Commerce 1996 2006 US$ 97 JPY 9,865 Libor+0.13 3.80 J.P.Morgan Chase Bank 1996 2006 US$ 200 JPY 20,723 Libor+0.14 4.00 Union Bank of Switzerland 1997 2007 US$ 244 GBP 150 6.686 8.50 Union Bank of Switzerland 1997 2004 US$ 30 JPY 3,360 6.33 2.75 Union Bank of Switzerland 1997 2007 JPY 9,895 GBP 50 2.00 8.50 Deutsche Bank 1998 2004 JPY 1,705 US$ 55 6.41 7.11 (formerly Bankers Trust Co.) DEM 25 CHF 20 CAD 20 Deutsche Bank 1998 2004 JPY 2,945 US$ 95 6.36 7.05 (formerly Bankers Trust Co.) DEM 43 CHF 35 CAD 34 Union Bank of Switzerland 1998 2003 JPY 12,150 US$ 100 4.00 6.375 Barclays Bank PLC, London 2002 2007 JPY 30,400 US$ 250 1.04 3M Libor+0.75 J.P. Morgan Securities Ltd. Deutsche 2002 2009 JPY 76,700 US$ 650 1.18 4.25
-13- (2) Interest rate swap contracts as of December 31, 2002 are as follows:
CONTRACT INTEREST RATE PER ANNUM NOTIONAL AMOUNT ------------------------------------------- IN MILLIONS PAY (%) RECEIVE (%) TERM --------------- ------------------- ------------------- ------------ Lehman Brothers Special Financing, Inc. US$ 150 Libor+0.25 6.375 1993-2003 J.P.Morgan Securities Ltd. US$ 149 6.91 Libor+0.155 1995-2005 Woori Bank (formerly Hanvit Bank) US$ 150 6.10 Libor+0.25 1996-2003 Korea Development Bank US$ 97 6.10 Libor+0.13 1997-2004 Union Bank of Switzerland US$ 70 6.33 Libor+0.31 1997-2004 Barclays Bank PLC, London US$ 300 6M Libor-1 Libor+0.45 1997-2004 Shinhan Bank US$ 100 6.50 6.75 1997-2004 Deutsche Bank US$ 55 6.93 1998-2004 (formerly Bankers Trust Co.) JPY 1,705 6.41 DEM 25 6.41 CHF 20 6.41 CAD 20 6.41 Deutsche Bank US$ 95 6.87 1998-2004 (formerly Bankers Trust Co.) JPY 2,945 6.36 DEM 43 6.36 CHF 35 6.36 CAD 34 6.36 Deutsche Bank US$ 100 Max(6,074-Libor, 0) Max(Libor-6.074, 0) 1998-2007 (formerly Bankers Trust Co.) Deutsche Bank US$ 100 Max(Libor-6.074,0) Max(6.074-Libor, 0) 1998-2007 (formerly Bankers Trust Co.)
The Company entered into the above swap contracts to hedge the fluctuation risk of exchange rate and interest rate of foreign currency debts. (3) The gains and losses on swap transactions for the years ended December 31, 2002 and 2001 are as follows (won in millions):
OTHER INCOME (EXPENSE) ----------------------------------- 2002 2001 --------------- --------------- Currency swap Gains Won 118,168 Won 79,913 Losses (35,890) (157,109) Interest rate swap Gains 5,843 7,534 Losses (24,963) (62,346) --------------- --------------- Won 63,158 Won (132,008) =============== ===============
-14- 14. POWER GENERATION, TRANSMISSION AND DISTRIBUTION EXPENSES: Power generation, transmission and distribution expenses for the years ended December 31, 2002 and 2001 are as follows (won in millions):
2002 2001 ------------- ------------- Material expenses: Coal Won -- Won 366,085 Oil 9,836 317,772 LNG -- 569,010 Others -- 14,271 ------------- ------------- 9,836 1,267,138 Amortization of Nuclear fuel -- 129,641 Labor expenses: Salaries 166,705 194,985 Severance and retirement benefits 52,997 49,298 Others 288,728 307,284 ------------- ------------- 508,430 551,567 Overhead expenses: Employee benefits 52,137 61,870 Taxes and dues 15,708 156,943 Rent 20,010 19,494 Depreciation 1,437,953 2,061,272 Maintenance 778,500 941,925 Commission and consultation fees 52,834 74,407 Compensation expense 63,532 84,081 Ordinary development expenses 93,943 139,336 Reserve for decommissioning costs -- 140,574 Impairment loss on utility plant 255,942 160,097 Others 76,216 254,568 ------------- ------------- 2,846,775 4,094,567 ------------- ------------- Won 3,365,041 Won 6,042,913 ============= =============
15. SELLING AND ADMINISTRATIVE EXPENSES: Selling and administrative expenses for the years ended December 31, 2002 and 2001 are as follows (won in millions):
2002 2001 ------------ ------------ Labor Won 333,016 Won 284,909 Employee benefits 37,286 33,226 Taxes and dues 15,677 15,697 Rent 16,207 23,831 Depreciation 48,004 42,704 Maintenance 14,924 21,489 Commission and consultation fees 78,470 73,752 Ordinary development expenses 12,788 13,247 Collection expense 253,040 235,311 Promotion 18,881 49,689 Bad debts 14,380 2,323 Communication 27,788 24,045 Insurance 11,701 10,997 Rewards 4,296 10,329 Others 53,558 49,475 ------------ ------------ Won 940,016 Won 891,024 ============ ============
-15- 16. RESEARCH AND DEVELOPMENT EXPENDITURES: Research and development expenditures of the Company for the years ended December 31, 2002 and 2001 are as follows (won in millions):
2002 2001 ----------------- ----------------- Intangibles Won 20,065 Won 60,465 Ordinary development expenses 106,760 152,608 ----------------- ----------------- Won 126,825 Won 213,073 ================= =================
17. INCOME TAX EXPENSE: (1) Income tax expense for the years ended December 31, 2002 and 2001 is as follows (won in millions):
2002 2001 ----------------- ----------------- Income tax currently payable Won 928,844 Won 535,831 Changes in deferred income taxes 339,634 211,749 ----------------- ----------------- Income tax expense Won 1,268,478 Won 747,580 ================= =================
(2) Deferred income tax liabilities as of December 31, 2002 and 2001 are as follows (won in millions):
ACCUMULATED DEFERRED INCOME YEAR TEMPORARY DIFFERENCES TAX RATE (%) TAX LIABILITIES ---- --------------------- ------------ ------------------- 2002 Won (4,559,354) 29.7 Won (1,354,128) 2001 Won (3,429,313) 29.7 Won (1,018,506)
18. RELATED PARTY TRANSACTIONS: (1) Transactions with related parties for the years ended December 31, 2002 and 2001 are as follows (won in millions):
RELATED PARTY TRANSACTION 2002 2001 - -------------------------------------------- -------------------------------- ------------- -------------- Sales and other income: Korea Hydro & Nuclear Power Co., Ltd. Sales of electricity and others Won 138,270 Won 64,187 Korea South-East Power Co., Ltd. '' 41,148 28,249 Korea Midland Power Co., Ltd. '' 21,734 15,658 Korea Western Power Co., Ltd. '' 38,022 26,368 Korea Southern Power Co., Ltd. '' 17,788 15,612 Korea East-West Power Co., Ltd. '' 42,586 21,059 Powercomm Corporation 63,994 62,955 Others '' 8,101 53,270 ------------- ------------- Won 371,643 Won 287,358 ============= ============= Purchases and others: Korea Hydro & Nuclear Power Co., Ltd. Purchase of electricity and others Won 4,636,130 Won 3,268,025 Korea South-East Power Co., Ltd. '' 1,449,355 1,136,424 Korea Midland Power Co., Ltd. '' 1,598,036 1,040,487 Korea Western Power Co., Ltd. '' 2,011,776 1,477,167 Korea Southern Power Co., Ltd. '' 1,785,817 1,311,091 Korea East-West Power Co., Ltd. '' 1,844,336 1,388,646 Korea Power Engineering Co., Inc. Designing of the power plant and others 41,399 54,559
-16-
RELATED PARTY TRANSACTION 2002 2001 - -------------------------------------------- -------------------------------- ------------- -------------- Korea Plant Service & Engineering Co., Ltd. Utility plant maintenance Won 38,744 Won 41,017 Korea Nuclear Fuel Co., Ltd. Purchase of nuclear fuel 2,776 36,687 Korea Electric Power Data Network Co., Ltd. Maintenance of computer system 153,301 163,029 Korea Electric Power Industrial Development, Ltd. Commissions for service and others 84,011 90,493 Korea Gas Corporation Purchase of LNG -- 566,063 Others Commissions for service and others 67,562 65,149 -------------- -------------- Total Won 13,713,243 Won 10,638,837 ============== ==============
(2) Receivables arising from related parties transactions as of December 31, 2002 and 2001 are as follows (won in millions):
2002 2001 ------------------------------------------------ ------------- OTHER ACCOUNT TRADE RECEIVABLES RELATED PARTY RECEIVABLES AND OTHER TOTAL TOTAL ----------------------------------------- -------------- --------------- -------------- ------------- Korea Hydro & Nuclear Power Co., Ltd. Won 8,020 Won -- Won 8,020 Won 7,132 Korea South-East Power Co., Ltd. 2,994 645 3,639 2,623 Korea Midland Power Co., Ltd. -- 382 382 483 Korea Western Power Co., Ltd. 2,722 423 3,145 5,247 Korea Southern Power Co., Ltd. 1,107 540 1,647 1,744 Korea East-West Power Co., Ltd. 3,897 621 4,518 2,012 Powercomm Corporation -- 5,731 5,731 4,556 Others -- 4,872 4,872 3,803 ------------- ----------- -------------- ------------- Total Won 18,740 Won 13,214 Won 31,954 Won 27,600 ============= =========== ============== =============
(3) Payables arising from related parties transactions as of December 31, 2002 and 2001 are as follows (won in millions):
2002 2001 ------------------------------------------------------- -------------- TRADE OTHER ACCOUNTS RELATED PARTY PAYABLES PAYABLE AND OTHER TOTAL TOTAL -------------------------------------------- -------------- ------------------ -------------- -------------- Korea Hydro & Nuclear Power Co., Ltd. Won 366,226 Won 2,283 Won 368,509 Won 338,017 Korea South-East Power Co., Ltd. 123,918 113 124,031 127,474 Korea Midland Power Co., Ltd. 168,224 186 168,410 112,351 Korea Western Power Co., Ltd. 176,608 208 176,816 165,791 Korea Southern Power Co., Ltd. 130,101 80 130,181 146,432 Korea East-West Power Co., Ltd. 141,830 187 142,017 167,793 Korea Power Engineering Co., Inc. -- 7,108 7,108 6,460 Korea Plant Service & Engineering Co., Ltd. -- 6,845 6,845 6,819 Korea Nuclear Fuel Co., Ltd. -- 570 570 552 Korea Electric Power Data Network Co., Ltd. -- 25,502 25,502 27,530 Korea Electric Power Industrial Development, Ltd. -- 12,353 12,353 8,586 Others 4,924 4,746 9,670 9,517 ------------- ------------ -------------- ------------- Total Won 1,111,831 Won 60,181 Won 1,172,012 Won 1,117,322 ============= ============ ============== =============
-17- 19. CONTINGENT LIABILTIES: (1) The Company is engaged in 232 lawsuits as a defendant and 41 lawsuits as a plaintiff. The total amount claimed from the Company is Won 98,069 million and the total amount claimed by the Company is Won 104,021 million as of December 31, 2002. The outcome of these lawsuits cannot presently be determined. However, management believes that the ultimate disposition of those litigations will not have a materially adverse effect on the operations or financial position of the Company. (2) The Company's debts of Won 17,646,157 million, including borrowings of Won 13,825,884 million, were transferred to the power generation subsidiaries at the time of spin-off. The Company has the collective responsibility together with the subsidiaries to repay those debts, which were transferred and outstanding, under the Commercial Code of the Republic of Korea. The balance of debts subject to those collective responsibilities as of December 31, 2002 is Won 6,867,718 million. (3) The Company has provided debt repayment guarantees for its related parties in connection with the related parties' borrowings as of December 31, 2002 as follows:
LOAN TYPE GUARANTEED COMPANY FINANCIAL INSTITUTIONS AMOUNT -------------- ------------------------------------ ------------------------- ----------------- Foreign KEPCO International Hong Kong Ltd. Nippon Life Insurance US$ 82,006,000 currency loan '' Norinchukin Bank 35,000,000 '' Korea Development Bank 13,908,000 KEPCO International Philippines Inc. Korea Development Bank 63,609,000 ----------------- US$ 194,523,000 =================
(4) KEPCO Ilijan Corporation, which is the subsidiary of KEPCO International Philippines Inc., is engaged in the power generation business in the Philippines and borrowed US$ 449,672,139 as project financing from Japan Bank of International Cooperation and others for that business. The Company has provided Japan Bank of International Cooperation and others with the guarantees for performance of the power generation business of KEPCO Ilijan Corporation as well as with the partial guarantees for the repayment of that borrowings. (5) The Company has provided debt repayment guarantees of US$ 303,266,667 in relation to the commercial borrowings. Also, the Company entered into the contract with Korea Development Bank, under which Korea Development Bank would guarantee the repayment of the Company's foreign currency debentures arisen at the spin-off of the Company's power generation division on April 2, 2001. (6) Five banks including the National Agricultural Cooperative Federation has provided the Company a credit (overdraft) line amounting to Won 245,000 million as of December 31, 2002. (7) The Company entered into a turnkey contract with the Korea Peninsula Energy Development Organization (KEDO) on December 15, 1999, to construct two 1,000,000 KW-class pressurized light-water reactor units in North Korea. The contract amount is US$ 4,182 million and subject to adjustment to cover any changes in the price level. (8) The Company entered into the Power Purchase Agreement with LG Energy Co., Ltd. and other independent power producers for power purchases in accordance with the Electricity Business Act and power purchased from those companies amounted to Won 1,140,810 million and Won 987,272 million for the years ended December 31, 2002 and 2001, respectively. -18- 20. SPIN-OFF: The Company spun off its power generation division during the first half of 2001 in accordance with the restructuring plan of the electricity industry in the Republic of Korea announced by the Ministry of Commerce, Industry and Energy on January 21, 1999. (1) The newly established power generation subsidiaries are primarily engaged in the sale of electricity to the Company through the Korea Power Exchange. Details of those subsidiaries are as follows:
NAME OF THE SUBSIDIARIES MAJOR POWER PLANT ------------------------------------------------ --------------------------------------------------- Korea Hydro & Nuclear Power Co., Ltd. (KHNP) Hydroelectric power plant and nuclear power plant in Gori and others Korea South-East Power Co., Ltd. (KOSEPCO) Thermoelectric power plant in Samchonpo and others Korea Midland Power Co., Ltd. (KOMIPO) Thermoelectric power plant in Boryung and others Korea Western Power Co., Ltd. (KOWEPCO) Thermoelectric power plant in Tae-an and others Korea Southern Power Co., Ltd. (KOSPO) Thermoelectric power plant in Hadong and others Korea East-West Power Co., Ltd. (KEWESPO) Thermoelectric power plant in Dangjin and others
(2) Details of the spin-off a) The Company spun off its power generation business as stipulated by the Commercial Code of the Republic of Korea. b) Registration date of spin off: April 2, 2001 c) Date of resolution of shareholders: March 16, 2001 d) Date of resolution of Board of Directors: February 24, 2001 (3) Assets and liabilities of the spun off division a) Assets and liabilities of the spun off division as of April 2, 2001, date of spin off (won in million)
KHNP KOSEPCO KOMIPO KOWEPCO KOSPO KEWESPO TOTAL -------------- ------------- ------------- ------------- ------------ ------------- ------------- Assets Won 18,791,413 Won 2,490,720 Won 2,662,209 Won 2,904,046 Won 3,627,985 Won 4,655,400 Won 35,131,773 Liabilities 9,426,614 1,258,716 1,336,317 1,461,408 1,830,607 2,332,495 17,646,157 -------------- ------------- ------------- ------------- ------------- ------------- -------------- Net assets Won 9,364,799 Won 1,232,004 Won 1,325,892 Won 1,442,638 Won 1,797,378 Won 2,322,905 Won 17,485,616 ============== ============= ============= ============= ============= ============= ==============
b) Assets and liabilities of the spun off division as of December 31, 2000 (won in million)
KHNP KOSEPCO KOMIPO KOWEPCO KOSPO KEWESPO TOTAL -------------- ------------- ------------- ------------- ------------- ------------- ------------- Assets Won 17,433,479 Won 2,688,953 Won 2,209,503 Won 2,943,194 Won 3,507,340 Won 4,696,226 Won 33,478,695 Liabilities 9,231,779 1,469,853 1,234,789 1,542,594 1,819,240 2,463,526 17,761,781 -------------- ------------- ------------- ------------- ------------- ------------- -------------- Net assets Won 8,201,700 Won 1,219,100 Won 974,714 Won 1,400,600 Won 1,688,100 Won 2,232,700 Won 15,716,914 ============== ============= ============= ============= ============= ============= ==============
c) Result of operations of the spun off division (From January 1, 2001 to April 1, 2001) (won in million)
KHNP KOSEPCO KOMIPO KOWEPCO KOSPO KEWESPO TOTAL ------------- ------------- ------------ ------------ ------------ ------------- ------------ Net sales Won 1,097,586 Won 410,195 Won 345,771 Won 406,931 Won 413,058 Won 481,710 Won 3,155,251 Cost of goods sold 875,074 360,346 280,101 380,139 401,384 460,825 2,757,869 ------------- ------------- ------------ ------------ ------------ ------------- ------------ Gross profit Won 222,512 Won 49,849 Won 65,670 Won 26,792 Won 11,674 Won 20,885 Won 397,382 ============= ============= ============ ============ ============ ============= ============
-19- 21. STATEMENTS OF CASH FLOWS: (1) Cash flows from operating activities were presented using the indirect method. Transactions not involving cash flows for the years ended December 31, 2002 and 2001 are as follows (won in millions):
2002 2001 ------------ -------------- Increase of investment securities due to the spin-off Won -- Won 17,119,453 Reclassification of long term loans to short-term loans 8,618 19,881 Reclassification of construction in-progress to utility plant 4,100,723 5,011,697 Reclassification of current portion of debentures 1,632,145 1,053,007 Reclassification of current portion of long term debt 811,349 350,712
22. SUPPLEMENTARY INFORMATION FOR COMPUTATION OF VALUE ADDED: The accounts and amounts needed for calculation of value added for the years ended December 31, 2002 and 2001 are as follows (won in millions):
2002 2001 -------------- ------------- Salaries and wages Won 776,847 Won 781,760 Provisions for severance indemnities 92,915 86,566 Employee benefits 92,486 96,897 Rent 36,425 43,472 Depreciation 1,485,956 2,466,884 Taxes and dues 31,453 172,712 -------------- -------------- Won 2,516,082 Won 3,648,291 ============== ==============
23. WELFARE PROGRAM FOR EMPLOYEES AND DONATIONS: Details of the welfare program for employees and donations for the years ended December 31, 2002 and 2001 are as follows (won in millions):
2002 2001 --------------- ------------- Donation to Welfare fund Won 50,000 Won 90,000 Electrification of rural and fishing villages 24,892 11,399 Donation to Korea Volleyball association and others 1,933 1,604 -------------- ------------- Won 76,825 Won 103,003 ============== =============
-20- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. KOREA ELECTRIC POWER CORPORATION By:/s/ Chung, Soo Eun ------------------------------------------ Name: Chung, Soo Eun Title: Chief Financial Officer Date : March 10, 2003 -----END PRIVACY-ENHANCED MESSAGE-----